Morningstar recently wrote up a analysis of the Streettracks Global Titans ETF (DGT), writes Roger Nusbaum. Like most of Morningstar's ETF reports I don't see much value from the work. The point of dissecting these reports is not to pick on the folks that write the reports but to help anyone who relies on this type of work to make investment decisions think about a few other things.
I mentioned DGT in a post about a month and a half ago because Doug Fabian made a good call about foreign stocks but implemented the idea poorly with DGT.
DGT is comprised of the 50 largest companies in the world. 63% of the fund is US and the rest is foreign. The Morningstar article seems to like the fund but it is not that committal. It does point out the DGT has a competitive yield. It yields 2.23%.
The report strikes me as wildly incomplete, but only about two minutes away from being useful.
This fund owns mega cap stocks. The average market cap of DGT is $145 billion. Mega caps have been lagging for years. This fund will continue to lag until mega caps rotate back in to favor which could be a while.
This is a three year chart that shows DGT lagging EFA by a lot and SPY by a little. It would have been useful if the Morningstar would have pointed out that an investor would have been better off with 63% in SPY and 37% in EFA, the domestic/foreign weight of DGT.
This did not come up but a mention about the reason for the lag (I think it was cap size) and some forward looking analysis about why DGT might not lag anymore, if that is what they think.
The report as it reads is close to useless.
- ETFs and closed-end funds mentioned in this article (clicking on a link pulls up articles for the ETF in question): DGT.
- The complete list of funds (and links to articles about them) covered by ETF Investor.
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